nep-for New Economics Papers
on Forecasting
Issue of 2006‒01‒01
seven papers chosen by
Rob J Hyndman
Monash University

  2. Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk By Refet S. Gürkaynak; Justin Wolfers
  3. Beyond macro variables: consumer confidence index and household expenditure in Hungary By Gabor Vadas
  4. Time-varying pass-through from import prices to consumer prices: evidence from an event study with real-time data By Marlene Amstad; Andreas M. Fischer
  5. Explaining and Forecasting Inflation in Turkey By Ilker Domac
  6. Hedge ratio estimation and hedging effectiveness: the case of the S&P 500 stock index futures contract By Dimitris Kenourgios; Aristeidis Samitas; Panagiotis Drosos
  7. Term structure transmission of monetary policy By Sharon Kozicki; Peter Tinsley

  1. By: Tony Guida (Université de Savoie); Olivier Matringe (UNCTAD)
    Abstract: This paper examines the forecasting performance of GARCH’s models used with agricultural commodities data. We compare different possible sources of forecasting improvement, using various statistical distributions and models. We have chosen to confine our analysis on four indices which are the cocoa LIFFE continuous futures, the cocoa NYBOT continuous futures, the coffee NYBOT continuous futures and the CAC 40, the French major stock index. As one may see the sample of indices is containing a genuine stock index also. The implied goal is to find out if the GARCH models are more fitted for stock indices than for agricultural commodities. The forecasts and the predictive power are evaluated using traditional methods such as the coefficient of determination in the regression of the true variance on the predicted one. We find that agricultural commodities time series could not be used with the same methodology than the financial series. Moreover it is interesting to point out that no real “model leader” was found in this sample of commodities. Finally increased forecast performance is not solely observed using non-gaussian distribution in commodities.
    Keywords: GARCH, commodities, volatility, forecasting, risk management
    JEL: C13 C32 C53 G15
    Date: 2005–12–20
  2. By: Refet S. Gürkaynak (Bilkent University); Justin Wolfers (University of Pennsylvania CEPR, NBER and IZA Bonn)
    Abstract: In September 2002, a new market in "Economic Derivatives" was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioral anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market.
    Keywords: economic derivatives, macroeconomic forecasting, uncertainty, disagreement, prediction markets, density forecasting
    JEL: C23 D21 J50 L13
    Date: 2005–12
  3. By: Gabor Vadas (Magyar Nemzeti Bank)
    Abstract: One of the most important aspects of consumer surveys is the computation of the consumer confidence index, which aims to provide accurate figures on the financial position and outlook of households as well as their intention concerning future consumption and savings. . Although the motion of the consumer confidence index is of interest to both policymakers and economic forecasters, it is not obvious whether the sub-questions included in the surveys and the published composite index derived from such questions can measure exactly what survey makers are curious to know. In this study we examine the properties and forecasting capability of the Hungarian consumer confidence index published by GKI Economic Research Plc. We argue that some questions are unable to measure what they theoretically should. However, others are useful in forecasting the consumption expenditure of Hungarian households. Our results suggest that, in addition to macro variables, the consumer confidence index contains information over and above macro variables.
    Keywords: consumer confidence index, consumption, forecast
    JEL: D1 E21 E27
    Date: 2005–12–19
  4. By: Marlene Amstad; Andreas M. Fischer
    Abstract: This paper analyzes the pass-through from import prices to consumer price index (CPI) inflation in real time. Our strategy follows an event-study approach that compares inflation forecasts before and after import price releases. Inflation forecasts are modeled using a dynamic factor procedure that relies on daily panels of Swiss data. We find strong evidence that monthly import price releases provide important information for CPI inflation forecasts, and that the behavior of updated forecasts is consistent with a time-varying pass-through. The robustness of this latter result is supported by an alternative CPI measure that excludes price components subject to administered pricing as well as by panels capturing difference levels of information breadth. Finally, our empirical findings cast doubt on a prominent role for sticky prices in the low pass-through findings.
    Keywords: Consumer price indexes ; Imports - Prices ; Inflation (Finance)
    Date: 2005
  5. By: Ilker Domac
  6. By: Dimitris Kenourgios (University of Athens); Aristeidis Samitas (University of Aegean); Panagiotis Drosos (University of Sheffield)
    Abstract: This paper investigates the hedging effectiveness of the Standard & Poor’s (S&P) 500 stock index futures contract using weekly settlement prices for the period July 3rd, 1992 to June 30th, 2002. Particularly, it focuses on three areas of interest: the determination of the appropriate model for estimating a hedge ratio that minimizes the variance of returns; the hedging effectiveness and the stability of optimal hedge ratios through time; an in-sample forecasting analysis in order to examine the hedging performance of different econometric methods. The hedging performance of this contract is examined considering alternative methods, both constant and time-varying, for computing more effective hedge ratios. The results suggest the optimal hedge ratio that incorporates nonstationarity, long run equilibrium relationship and short run dynamics is reliable and useful for hedgers. Comparisons of the hedging effectiveness and in-sample hedging performance of each model imply that the error correction model (ECM) is superior to the other models employed in terms of risk reduction. Finally, the results for testing the stability of the optimal hedge ratio obtained from the ECM suggest that it remains stable over time.
    Keywords: Hedging effectiveness; minimum variance hedge ratio (MVHR); hedging models; Standard & Poor’s 500 stock index futures
    JEL: G13 G15
    Date: 2005–12–19
  7. By: Sharon Kozicki; Peter Tinsley
    Abstract: The sensitivity of bond rates to macro variables appears to vary both over time and over forecast horizons.  The latter may be due to differences in forward rate term premiums and in bond trader perceptions of anticipated policy responses at different forecast horizons.  Determinacy of policy transmission through bond rates requires a lower bound on the average responsiveness of term premiums and anticipated policy responses to inflation.
    Keywords: Monetary policy
    Date: 2005

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